Management Consultant

A business strategist and economist with more than 25 years experience in management consulting, business and government. Specialties include Retail Lifecycle Management, supply chain strategy and operations, and business transformation.

Tuesday, July 8, 2008

In 1988 Don Schneider, CEO of Schneider National, Inc., the largest U.S. truckload motor carrier, over-ruled the advise of his executive team and decided to invest some $4,000 per truck in an experimental on-board computer system (from Qualcomm) that would allow continuous communication between his over-the-road fleet of trucks and a central computer system. Originally lured by the expectation that better communication would make his company preeminent in customer service, Schneider found that the primary advantage came from lower costs of operations. Two-way communication and global positioning provided better visibility to the fleet and offered the carrier the opportunity to change its dispatch and routing decisions in real time. The carrier could now react in real time to the latest news available about the host of everyday occurrences that can impact both a fleet's delivery progress and its customers' requirements, such as:

weather delays

shipping dock congestion

holdups in paperwork

accidents

road construction delays

changes in shipment routing

This relatively primitive event management system, combining real-time visibility with real-time communication, put managers back in control of the fleet and allowed them to make profit-maximizing adjustments in operations. What had initially looked like a $14 million gamble paid off quickly in millions of ways as countless errors and missed opportunities were avoided.

Today's supply chain managers, operating in complex, multi-modal, multi-country and even hostile environments require a far greater level of control. Many products like flowers, fresh foods and pharmaceutical agents are difficult to handle, require temperature control or other kinds of protection, and are shipped over global networks. Even the simplest consumer goods now cross numerous borders, where they are taxed, transshipped, rebundled and otherwise transfigured. At every point of contact items can be lost, infected or damaged, sometimes maliciously, occasionally catastrophically.

For shippers and receivers the stakes involved in safe and secure transit now rise well beyond the simple calculus of "over, short or damaged". Their governments, stockholders and lawyers now need to know who is responsible when toys become toxic; when food becomes poison; when shipments become weapons. More helpfully, supply chain managers are exploring and beginning to adopt systems and processes that can prevent dangerous or malignant items from infiltrating our stores, restaurants and homes.

Adoption of event and asset management systems and processes are rising to the top of corporate agendas. Using a variety of sensors, communication media and protocols and sophisticated information centers, these systems are designed to provide early warning of unexpected events and bring them under the control of supply chain managers.

One such provider of visibility and control solutions, System Planning Corporation of Arlington, VA, has developed GlobalTrak. Designed to provide real-time information on containers as they move from source to ultimate destination, the highly configurable GlobalTrak package is comprised of various sensors and seals, two-way communication systems, and data management systems that match information about events in transit with the standard shipping documents associated with those events. Users determine what events they need to monitor and how closely they need to be monitored, whatever they may be, such as:

Pickup, delivery and delay times

Changes in cargo temperature or radiation levels

Delivery paths

Opening of container doors

The system is then configured to report on progress as it occurs and to provide special reports when the sensors pick up unexpected activity. Because the system can be equipped with satellite, cellular and radio frequency technology, information about events can be captured and acted upon as they occur, no matter where or when.

Because such systems offer a great deal of protection, their use is being promoted and to some extent underwritten by at least one insurance provider, Marsh, which is developing a supply chain risk management practice. Prudent shippers are no longer relying on government rules and inspectors to protect them from hazards associated with international commerce.

Thursday, July 3, 2008

Previously we had reported on Kellogg's commitment to promote only healthy food to children (see Kellogg Reformulates). Kellogg recently announced significant progress in both introducing new, healthier foods and in reformulating some of its old favorites.

Last year when the reformulation program was announced about half of Kellogg's products around the world that were being marketed to children met the Nutrient Criteria, which are:

No more than 200 calories per serving

No more than 2 grams of saturated fat and no grams of labeled trans fat

No more than 230 milligrams of sodium

No more than 12 grams of sugar

Kellogg now reports that by the end of 2008 approximately 70% of products marketed to children will meet the guidelines whereupon advertising to children under 12 for the products that fail the guidelines will cease.

Kellogg is also making it easier for consumers to find nutrition information, by prominently displaying Guideline Daily Amounts (GDA's) on package labels. Its informational website, KelloggNutrition.com, has also been enhanced.

In more good news, presumably aimed at adults, Kellogg has announced at least a temporary return of the Hydrox cookie in a limited 100th Anniversary Edition. You can show your enthusiasm for the first and (in my humble opinion) BEST creme-filled chocolate sandwich cookie by entering the Hydrox Fan Contest at HydroxCookies.com before July 14, 2008.

Wednesday, July 2, 2008

In 1999 when I first met Orin Smith, the now retired ceo of Starbucks, I was impressed with his warmth, intelligence and sincerity. I live in Chicago, where Starbucks had claimed an early beachhead, so I was familiar with the company's proclivity to create storefronts in close proximity with each other, and as a supply chain strategist I needed to know how this pattern would evolve as the chain expanded. Orin explained that the stores reached economies at very small scale; that each store in an urbanized area drew from a very small locale; and that a store in an office building with 20,000-60,000 inhabitants would not infringe on the market territory of one across the street with another 30,000 office workers.

In short, one store with one coffee station in the right location was profitable, even though most of its business occurred before lunchtime.

Starbucks advertising in those heady days was carried on millions of cups and thousands of storefronts and almost nowhere else. Its message was the wafting of the aroma of fresh ground beans through the open doorways.

As Starbucks scales back a bit in the U.S. it is much less likely to do so in urban areas than in suburban and residential locations where the store design and concept is less relevant to its clientele. Despite many false starts, Starbucks has failed to offer food that approaches the quality of its drinks. The "big food" concept (featuring muffins as large as your head), the "soggy sandwich" concept, and now the "reheated breakfast sandwich" concept all lack the basic elements of freshness, value and taste. That matters less in an urban location, where the coffee trade alone can sustain the store. In a suburban location, it takes more than coffee to start the family car.

For Lewis Black's comedic take on the phenomenon check out this video on YouTube.